Recent legislative reform in the water sector has expanded the special administration regime and there are further changes on the horizon

Next month marks the hotly anticipated sanction hearing for the Thames Water restructuring plan. We take this opportunity to look back at the key legislative changes made last year, as well as those earmarked for the future.

2024 legislative changes

New legislation was introduced last year to amend the special administration regime for the water sector.

The key changes to the existing regime were as follows:

We examine the findings of the High Court’s decisions and discuss the lessons which directors of distressed businesses should take from them

The collapse of BHS in April 2016 remains one of the most extraordinary corporate failures in recent memory. Eight years on from the commencement of insolvency proceedings, and following a lengthy trial, the High Court has issued an expansive judgment on claims brought by the joint liquidators of four companies in the group against two former directors.

Factual background

The Supreme Court has been given its first opportunity to “address the existence, scope and engagement of an alleged duty of company directors to consider, or to act in accordance with, the interests of the company’s creditors when the company becomes insolvent, or when it approaches, or is at real risk of, insolvency”. The corporate restructuring and insolvency community has been waiting for this “momentous” judgment with anticipation for the last 17 months.

The facts of the case:

Imagine that IPs have been appointed as administrators of an aerospace engineering company that operates around the world. The company was financially stressed before the COVID-19 pandemic and then sales dried up. With no reasonable prospect in sight, the directors filed for administration and questions have since been raised about how the directors conducted the company’s affairs shortly before it entered administration.

Introduction and points for consideration by trustees

Die weltweite Ausbreitung des Coronavirus sorgt für heftige Turbulenzen im Wirtschaftsleben. Gerät eine GmbH in finanzielle Schieflage, steht besonders die Geschäftsführung unter Druck. Sie kämpft um das wirtschaftliche Überleben der Gesellschaft. Gleichzeitig kommen verschiedene Szenarien für die Haftung des Geschäftsführers in Betracht, wenn dieser keine Krisenprävention durchgeführt hat oder in der Krise nicht die erforderliche Sorgfalt anwendet.

Haftung wegen unzureichender Krisenprävention

The coronavirus pandemic is sending shock waves through the business world. If a GmbH (German limited liability company) finds itself in financial distress, the management in particular will be under pressure and must fight for the survival of the business. At the same time, there are various scenarios in which managing directors could be held liable for not implementing crisis prevention measures or exercising the necessary diligence during the crisis.

Liability for inadequate crisis prevention

With two decisions (No. 1895/2018 and No. 1896/2018), both filed on 25 January 2018, the Court of Cassation reached opposite conclusions in the two different situations

The case

The Constitutional Court (6 December 2017) confirmed that Art. 147, para. 5, of the Italian Bankruptcy Law does not violate the Constitution as long as it is interpreted in a broad sense

The case

With the decision No. 1195 of 18 January 2018, the Court of Cassation ruled on the powers of the extraordinary commissioner to require performance of pending contracts and on the treatment of the relevant claims of the suppliers

The case